Chapter 17
1. Why are mutual funds popular with individual investors?
Able to enjoy economies of scale by incurring lower transaction costs and commissions. Provide opportunities for small investors to invest in a liquid and diversified portfolio of financial securities.
2. What is the purpose of index funds? How does this differ from other equity mutual funds? Why are index funds growing in popularity? Index funds are funds in which managers buy securities in proportions similar to those included in a specified major index. Index funds involve little research or management, which results in lower management fees and higher returns than actively managed funds. Actively managed funds turn over their holdings rapidly.
3. How
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Insider Trading and Sec Fraud Enforcement Act of 1988- required mutual funds to develop mechanisms and procedures to avoid insider trading abuses. Market Reform Act of 1990- allows the SEC to introduce circuit breakers to halt trading on exchanges and restrict program trading when it is deemed necessary. National Sec Market Improvement Act 1996- exempts mutual fund companies from oversight by state securities regulators.
8. In what ways are hedge funds different from mutual funds?
Are not subject to heavy regulation that apply to mutual funds. Do not have to disclose their activities to third parties. Because of less regulation, they use aggressive strategies that are unavailable to mutual funds. Actual data cannot be individually tracked. Self-reported. Take positions speculating that some prices will rise faster than others. Do not have to register with SEC. They avoid regulation by limiting the number of investors to less than 100 and by requiring investors to be accredited.
9. What are the primary differences between index funds and ETFs? What are two examples of ETFs?
ETFs are traded on a stock exchange at prices that are determined by the market.Etfs can be traded during the day, they can be purchased on margin and sold short by an investor. ETF investors can defer capital gains as long as they
Mutual Funds are a pool of funds collected from many investors in order to purchase stocks, bonds, and other investments in greater amounts. Mutual funds are shares of ownership in a group of companies.
think of a mutual fund as a company that brings together a group of people and invests
They are also similar to mutual funds in that they are pooled investment vehicles that accept investors’ money and generally invest it on a collective basis. However, hedge funds are not
An index fund is a conservative investment choice that generally outperforms active funds. Find out the answer to, “What is Vanguard 500?”
Mutual fund has been existing for a long time, but there are still a lot of details about it are not very clear. Generally, this paper is discussing not only the overall performance of mutual funds, but also the functions of each subpart and how are they related to each other. Specifically, there are several questions been answered: how is mutual funds’ overall performance? What is the factor that affects its behaviour the most? How does each composition affect the overall performance? Will there be any differences between the actively managed funds and passively managed funds? How are mutual funds’ performance compared with other market index during the past, specifically from 1975 to 1994? How to understand the fund’s performance by looking at the correlations and so on? By studying these questions separately, a better understanding of mutual funds and their properties will be obtained.
An "index fund" depicting a kind of common fund or unit investment trust (UIT) whose investment objective ordinarily is to accomplish the equal return as a specific market index, for example, the S&P 500 Composite Stock Price Index, the Russell 2000 Index or the Wilshire 5000 Total Market Index. An index fund will endeavor to accomplish its investment objective principally by putting resources into the securities (stocks or bonds) of organizations that are incorporated in a chose index. Some index funds might additionally utilize derivatives, (for example, options or futures) to help accomplish their investment objective. Some index funds put resources into the sum of the organizations included in an index; other index funds put resources into a delegate example of the organizations included in an index.
5. Are the Life-Style funds or the life-Cycle funds consistent with the theory (MeanVariance approach)?
The primary constraint on firms' ability to permit their insiders to trade on the basis of the nonpublic information they obtain in the course of the employment is rule 10b-5, which is the SEC's principal weapon against insider trading. The SEC's authority to enact rule 10b-5 is based on 10(b) of the 1934 act, a broad provision that authorizes the SEC to prohibit "any manipulative or deceptive device or
1a: The key players in the market; and the types of investments available to both individual investors and institutional investors,
Hedge funds feature returns different from those of mutual funds. The different trading strategies and investment styles are amongst a few factors that explain the difference (Boyson, 2010). The institutional and individual investors create a common pool of funds and employ professional managers to manage the fund. Ideally the manager is compensated from two sets of fees: management fee and performance fee. They impose a management fee based on the size of the asset managed, usually at the rate between 1-2%. A performance fee will be imposed at the rate between 20-30% of the returns on the investments made (lecture notes).
Hedge funds are investment vehicles that explicitly pursue absolute returns on their underlying investments. Hedge Fund incorporate to any absolute return fund investing within the financial markets (stocks, bonds, commodities, currencies, derivatives, etc) and/or applying non-traditional portfolio management techniques including, but not restricted to, shorting, leveraging, arbitrage, swaps, etc. Hedge funds can invest in any number of strategies. Hedge fund managers typically invest money of their own in the fund they manage, which serves to align their interests with
Enables manual/automatic updation of all kinds of transactions such as: Buy, Sell, Systematic Investment Plan, Systematic Withdrawal Plan, Dividends, Rights, Bonus and Splits.
Mutual funds are an easy, convenient way to invest, without having to worry about choosing individual stocks. A mutual fund can be defined as a single portfolio of stocks, bonds, and/or cash managed by an investment company on behalf of many investors. The investment company manages the fund, and sells shares in the fund to individual investors. When one invests in a mutual fund, they become a part-owner of a large investment portfolio, along with all the other shareholders of the fund. The fund manager invests the contributions when shares are purchased, along with money from the other shareholders. Every day, the fund manager counts up the value of all the fund's holdings, figures out how many shares have been purchased by
1. The fund deals with technology driven companies due to the expertise of its fund manager in that area; comfortable in prediction of individual stock
Gold ETFs are open ended exchange traded funds that help the financial specialist, put their cash in gold which is 99.5% unadulterated. Gold Exchange Traded Funds are otherwise called paper gold. These are recorded on the stock trades and financial specialists are allocated units of the shared asset where every unit regularly speaks to one gram of gold. There are ETFs